New IRS form lets taxpayers claim 2025 deductions on tips, overtime pay, car loan interest

Tax Deductions Overview - The One Big Beautiful Bill Act introduces four new tax deductions, including an enhanced deduction for seniors aged 65 and older, which allows an additional deduction of $6,000 starting with 2025 returns [1][15] - The new deductions are classified as "below-the-line deductions," meaning they do not reduce adjusted gross income (AGI) but are available to all eligible taxpayers, regardless of whether they itemize deductions or take the standard deduction [3][10][11] Specific Deductions - A new deduction for car loans will be available for loans taken out in 2025 to purchase new cars assembled in the U.S. This deduction does not apply to used cars or vehicles assembled outside the U.S. [2][5] - The maximum annual deduction for tip income is set at $25,000 per return, which can significantly reduce taxable income for eligible taxpayers [23] Eligibility and Limitations - Higher-income seniors may receive a reduced or no tax break, as the enhanced deduction phases out for modified AGI over $75,000 for singles and $150,000 for joint filers [1][28] - The "no tax on tips" deduction is not available for taxpayers who file as married filing separately, and tips must be reported to qualify for the deduction [29][22] Reporting and Compliance - Taxpayers must report qualified tips on specific forms (W-2, 1099, or Form 4137) to claim the deduction, and tips must be received as part of legal transactions [22][21] - Automatic service charges or mandatory gratuities do not qualify as "qualified tips" for the deduction, emphasizing the need for voluntary customer tips [31][30]